Verizon Signals the End of the Unlimited Data Plan

The unlimited data plan party could end soon. Verizon Wireless has hinted it is likely to follow AT&T and restrict the amount of data consumers can suck in through their phones.

“We will probably need to change the design of our pricing where it will not be totally unlimited, flat rate,” Verizon’s chief financial officer John Killian told Bloomberg.

For nearly 90 percent of smartphone users, new pricing plans are unlikely to make a big difference in how they use their phones, says Chetan Sharma, who runs a consulting firm focusing on telecom issues. But for super-users, this could signal a change in how smartphones and apps are designed.

It could force developers and entrepreneurs to take a second look at how data is delivered and optimized.

“So far, the ecosystem hasn’t paid attention to delivery efficiency,” says Sharma. “Content developers rarely care how much data is being transferred over their app. Now there’s room for technology that can help change that.”

Wireless service providers’ decision to do away with unlimited data plans plans runs orthogonal to what smartphones makers are doing. Smartphones today are in a race to offer more storage, along with the ability to shoot high-definition videos and photos. And they encourage you to share, uploading those files to YouTube and Flickr. Add to that video chat capability, especially over cellular networks, and there’s more stress than ever on the network.

After Apple introduced the iPhone in 2007, it unlocked a world where users spend more time surfing on the phones, playing with apps and watching YouTube clips than talking on their phone. A Consumer Reports study found that the average iPhone user consumes 273 MB of data per month. About 4 percent users in that study gobbled an average of 1 GB per month.

Sharma estimates an average iPhone consumer uses about 600 MB a month, while a smartphone user who’s not on the iPhone or using an Android device takes in about 300 MB of data monthly. Unless, something changes, that data consumption will only go up, especially with the introduction of more powerful smartphones, straining the network’s capacity, he says.

With the iPhone, AT&T has been the first to feel the pain. In response, earlier this month, AT&T introduced a tiered pricing structure for data. Instead of a flat monthly fee of about $30 for unlimited data, AT&T users will now pay $15 a month for 200 MB, or $25 a month for $2GB. (See what AT&T’s limited data plans mean for you.)

Verizon is not changing the status quo just yet. The company has hinted it will introduce tiered data pricing plans as it opens up its LTE or 4G network. 4G data cards on the Verizon’s network could be launched later this year, followed by the first 4G smartphone next year, estimates Sharma.

A Verizon spokesperson declined to comment on when the company plans to introduce new data pricing plans.

“Unlimited pricing works well when you are trying to create demand,” says Sharma. “But now carriers are facing the reality that while their data revenue is fixed, their costs keep going up.”

Last year, approximately 70 percent of data traffic on wireless networks came from data cards. This year, smartphones will pretty much account for all data requests, says Sharma.